US tariffs on Indian goods slashed to 18% from 50% in exchange for India halting Russian oil purchases
Reuters
New Delhi, Updated At : 01:22 PM Feb 03, 2026 IST
US President Donald Trump on Monday announced a trade deal with India that cuts US tariffs on Indian goods to 18% from 50% in return for India halting Russian oil purchases and lowering trade barriers. Trump said the pact includes higher Indian purchases of US energy, coal, technology and farm products, and is the first phase of a broader agreement to be negotiated later.
Here are the key points so far:
Boost to US energy, defence, tech purchases
India will raise purchases of US petroleum, defence equipment, electronics, pharmaceuticals, telecom products and aircraft, with some farm market access also offered. Buying commitments will be spread over several years. Although Trump said India would cut tariffs to zero, it is not yet clear which products will see zero duties or phased reductions, as in India’s EU and UK deals. In 2024, America’s agricultural trade deficit with India was $1.3 billion.
Gains for India
Exporters say the cut in US tariffs to 18% will significantly boost Indian shipments—textiles and apparel, pharmaceuticals, chemicals, footwear, jewellery and food items like shrimp—bringing them closer to Asian peers such as Vietnam and Bangladesh.
Russian oil
Indian refiners have been reducing Russian oil purchases and diversifying supplies toward the US, Middle East, Africa and South America. Refiners will need a wind-down period to exit existing Russian contracts, and the government has not ordered a full halt, refinery sources said.
Bilateral trade
After the US tariff hike in late August, sectors such as textiles, jewellery and shrimp were hit, though discounts helped exporters retain buyers. Exports to the US in January–November rose 15.9% year-on-year to $85.5 billion, while imports reached $46.1 billion. Two-way goods and services trade reached $212.3 billion in 2024, with a $45.8 billion US goods trade deficit and a small services surplus, according to US estimates.
Tariffs on steel, aluminium
Analysts say some reciprocal tariff cuts may occur under the framework, but US Section 232 duties on steel, aluminium, copper, automobiles, auto parts and some other goods are likely to remain. Engineering goods exports to the US rose about 5% year-on-year to $14.68 billion in the first nine months of 2025/26. As a result, parts of India’s exports to the US will continue to face higher duties despite the deal.
Boost to investor sentiment
The announcement lifted investor sentiment: the rupee rose more than 1% against the dollar, the Nifty 50 gained about 3% after jumping as much as 5%, and the 10-year bond yield fell around 5 basis points. Analysts said the pact could support exports, capital inflows and the rupee, though a full halt to Russian oil purchases may take time to implement.
